Akamai, LimeLight, And Level 3: Is Internet Video Growth Slowing?

Shares in content delivery networks like Akamai (AKAM) and LimeLight (LLNW) have sold off sharply. So has the stock of internet infrastructure network Level 3 (LVLT).

The market believes that fierce price competition has hurt the margins at AKAM and LLNW. Over the last three months, Akamai shares are down 25% and new IPO LimeLight is off over 60%.

But, margin is not the only problem.Growth rates are flattening out. Akamai’s revenue rose just over 50% in the June quarter to $153 million. That was about the same as for the full year 2006.

In the June quarter, revenue growth at LimeLight was 43%. But, for the first six months, the topline grew at 72%. Quite a comedown.

LVLT, which provides quite a bit of the industry’s internet "pipes" had flat revenue in the last quarter. Its stock is down almost 15% in the last three months.

With the growth of video storage and streaming, these companies should be doing well, and their guidance should not be so modest.

But, a new look at video streaming on the internet shows that the business might not be as robust as assumed. According to comScore, the number of unique video streamers grew only 11% from January 2007 to June. YouTube’s growth rate was 36%, making it the exception. That means that the sites at the tier below it are showing almost no growth at all.

If the trend continues, the companies like AKAM and LVLT that are the service providers for web video have an unhappy future. And, that assumes that prices wars begin to end.